Wage underpayment is a significant issue that affects both employees and employers. While most organisations aim to comply with workplace laws, hidden risks and systemic issues can lead to non-compliance, often going unnoticed until they result in substantial financial and reputational consequences.
When employees are not paid correctly, it can lower morale, damage an organisation’s credibility, create legal risks, and lead to costly penalties.
Recent cases within the education sector underscore how even large and well-resourced institutions can face wage compliance challenges. These incidents highlight common pitfalls and key takeaways that all organisations can learn from to improve their payroll practices and compliance frameworks.
Common challenges in the university industry
The higher education industry faces unique challenges in wage compliance, including:
- Complex employment structures: Universities employ a diverse workforce, including full-time, part-time, casual, and contract staff, each with different entitlements and pay structures. Managing compliance across these categories can be difficult.
- Inaccurate benchmarking for academic tasks: Many institutions rely on estimated time allocations for academic duties such as marking and tutorial preparation, which may not reflect actual hours worked, leading to underpayments.
- Decentralised payroll systems: Universities often have multiple faculties and departments managing payroll independently, increasing the risk of inconsistencies and compliance gaps.
- Lack of centralised oversight: Without a centralised compliance framework, discrepancies in pay can go undetected for extended periods, exacerbating financial liabilities.
- Insufficient payroll audits and reviews: Many institutions can miss conducting routine payroll audits, leading to systemic non-compliance that is only identified when employees raise concerns or external audits are conducted.
Key lessons for organisations
Regardless of industry, businesses can take the following steps to strengthen their wage compliance:
- Benchmarking systems must be accurate: Word-based benchmarks for marking assignments may not accurately reflect the effort required. Benchmarking should align with the actual time casual employees spend on tasks. Employers should regularly review and refine time-tracking methods to ensure fair and accurate payment.
- Record-keeping is critical: Poor record-keeping exacerbates compliance failures. Employers must diligently maintain detailed and accurate records of hours, entitlements, and payments.
- Regular reviews are essential: Employers should routinely check their systems to ensure they align with awards and agreements and make sure any benchmarking systems or time & attendance systems used accurately reflect the work performed.
- Act to fix mistakes: Introduce comprehensive remediation programs including back payments, interest, and superannuation adjustments. This proactiveness shows a commitment to rectifying the situation and that having an underpayment plan is important.
- Strengthen governance and oversight: Establishing dedicated compliance teams or committees can help maintain regular oversight of payroll processes. Keeping wage compliance as a standing agenda item in senior management discussions fosters accountability and proactive risk management.
Proactive compliance: The path forward
The recent scrutiny of wage compliance in the education sector serves as a wake-up call for all industries. Regulators are increasingly prioritising payroll compliance, and organisations must take a proactive approach to avoid potential pitfalls. Rather than reacting to compliance failures, businesses should ask themselves: Are we confident our payroll systems are accurate? and If not, why not?
This mindset fosters accountability and continuous improvement, ensuring that employees receive their correct entitlements and that organisations uphold their legal and ethical responsibilities.
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Yellow Canary’s automated compliance platform empowers businesses in the higher education sector to proactively identify and mitigate risks, helping with accurate employee payments and seamless ongoing compliance.
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